WASHINGTON (July 25, 2006)—The National Association of Mutual Insurance Companies (NAMIC) spoke last Friday before the Presidential Working Group on Financial Services (President’s Working Group) at the Department of Treasury to come up with a long term public/private partnership to address the long-term availability and affordability of terrorism risk insurance.
“We greatly appreciated being invited to share our views before the Presidential Working Group,” said Justin A. Roth, NAMIC federal affairs senior director. “Terrorism is an ongoing threat to the people and government of the United States. Therefore, a long-term insurance industry program coupled with a government backstop at an appropriate level of loss is essential to assuring an orderly economic recovery and reconstruction effort after any significant terrorist attack.”
During the meeting, NAMIC laid out their position on the uninsurability of terrorism insurance and the need for a permanent terrorism risk program, one that would keep small and medium-sized insurers in the game by having a low trigger and reasonable deductible and retention levels.
“NAMIC offers a unique perspective on the need for a long-term solution to terrorism risk insurance as we represent some of the largest and smallest property/casualty insurance companies in the country,” stated Roth.
On December 22, 2005, President Bush signed into law the Terrorism Risk Insurance Extension Act of 2005, (TRIEA) which extends TRIA through December 31, 2007. The law extends the temporary federal Terrorism Insurance Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The Treasury Department implements the Program. The government backstop was established under the Terrorism Risk Insurance Act of 2002 (TRIA) and extended under TRIEA because there was, and still is, insufficient private sector terrorism insurance and reinsurance coverage to provide adequate coverage in the event of another large-scale terrorist attack.
NAMIC used this opportunity to outline its recently Board-approved three-tier solution “Statement of Principles on Terrorism Risk Insurance”:
“A long term private/public terrorism insurance program is necessary because terrorism is fundamentally an uninsurable risk, due to the inability of insurers to predict when events will occur and because of the potentially catastrophic costs of an attack,” said Roth. “To be effective, a permanent terrorism program must allocate the costs of terrorism events between the private and public sector in a way that maximizes private sector involvement while assuring that private insurers can continue to meet their obligations across all economic sectors and insurance product lines after a terrorism event.”
“NAMIC will continue to work with the rest of the insurance industry, members of the House and Senate and the Department of Treasury to create a permanent public/private partnership on terrorism before the TRIA extension expires December 31, 2007,” said Roth.
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